The year 2014 has started with dynamic and large reforms in the taxation of real estate in Greece. On the 1st January of the year a new estate tax law came into force, which entirely replaced all older applicable regulations, such as the so-called ETAA or the F.A.P. The new scheme provides a two-component taxation; firstly each property is taxed separately (first component: main tax), and in addition there is a small tax on the value of the entire real estate property of a person (2nd component: additional tax). It should be noted that in order to increase the taxable base for the first time even plots that are outside of the urban area are taxed.
The provisions of the new property tax Greece
The new law, which is called in the short form EN.F.I.A, provides the comprehensive taxation of real estate property in Greece, which means that recently all properties of all categories are taxed. For the calculation of the tax a number of different criteria form in addition to the size of the property the basis. Some of the criteria are the type of property, the objective value, the age of the property, and more .
The main tax is calculated on the basis of a base tax, which is multiplied or reduced on the basis of the above mentioned criteria. As it was said, all kinds of real estate are now considered in taxation. This means that the tax is imposed both on buildings as well as on land in and outside of urban areas. Even agricultural land and pastures are affected.
The additional tax applies then in the second step only those owners whose real estate properties in Greece have in total a worth that exceeds 300.000 Euro. In relation to the old law (“FAP”), where the tax-free allowance laid at 200.000 Euro, this is even an increase in the allowance. The corresponding percentages of that tax are also relatively smaller than in the old law (from 0.1 % to 1 %). Plots that are located outside the urban zone are not considered in the calculation of that additional tax.
According to the new conditions, the law now provides the following rules for the main tax:
– For buildings (apartments, offices and commercial buildings, etc.) the base tax lays – depending on the zone in which the property is located – between 2,- and 13,- Euro per square meter. In total there are provided twelve (12) zones. Auxiliary spaces will be charged with 10% of the value of the principal use. For special buildings the law reduces the tax up to 50 %, while for non-electrically powered units 40% less are to be paid. Only stables and some other temporary structures for farms are exempt absolutely from taxation.
– For plots – depending among others on their location – there are fixed tax rates of 3,- to 9.000,- Euro per “Strema” (1 stremma = 1,000 square meters). In that case the law provides a breakdown into 25 categories.
– For agricultural land, pastures and other plots that are outside the urban zone a tax of 1,- Euro per 1.000 square meter is set.
In the calculation of the main tax as mentioned above a variety of factors is considered, that either increases or reduces the base tax. Among the factors that can influence the tax, there are the age of the property, the location of the property, the number of open property sides, the floor on which the property is located, unless a multi-storey building is present, and the use of the land.
For the final calculation of the tax there are provided discounts and concessions for certain groups of people. In particular, families with many children, long-term unemployed, disabled people and poor families get discounts of 50% and sometimes even 100 %, subject to certain income and ownership exist.
Winners and Losers of the real estate tax law
As with any law, likewise at the new tax “EN.F.I.A.” there are winners and losers. Among the winners are mainly owners of apartments. At apartments the ownership of the plot is distributed to the number of units that are built on it. Thus, the property portion per unit is relatively small. These owners must now pay – relative to the previously valid “special levy for real estate” (EETIDE) that had to be paid via the DEI (supplier for in Greece) – a slightly reduced tax. Among the big losers, however, are the owners of properties that are not connected to the electricity grid, owner of completely undeveloped land and owners of agricultural fields. All of them must now pay for the first time a property tax on their property.
In general, this new property tax was introduced as a somewhat fairer and more favorable taxation of real estate. But it must be noted that a once – only because of the crisis introduced – one-off levy now has been converted to an annual real estate tax with this new law. In addition, due to the universal validity of the new property tax a large number of owners will be further disadvantaged compared to the before mentioned special arrangement. And another paradox of the law lies in the fact that the real estate tax is calculated based on the objective property value that is set by the Ministry of Finance. This value lays in the most cases far above the actual market value of the property.
In summary it can be said that the issue of “new property tax Greece” has already caused some debates and reactions that can be intensified the next time. The new tax finally provides another great financial burden for many Greek households. In an attempt to consolidate the Greek budget, the Greek legislature has clearly opted for a measure that from the dream of most Greeks to own their four walls, makes a nightmare, or – as we would say in this country – an Ephialtes.
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